Hungary’s Central Bank Signals Much Lower Inflation Ahead

Hungary’s central bank is preparing the public for an inflation path far gentler than it had forecast just a few months ago. In its newly released quarterly Inflation Report, the Magyar Nemzeti Bank (MNB) says it now expects significantly slower price growth in 2026, helped by falling global food prices, easing energy costs, and a forint that has strengthened enough to help cool import inflation.

The report was presented shortly after this week’s rate-setting meeting, where the Monetary Council kept the base rate unchanged at 6.5%. While the decision itself was expected, the tone of the bank’s communication shifted: the long-assumed “extended hold” period is no longer taken for granted.

According to András Balatoni, the MNB’s Director for Economic Forecasting and Analysis, underlying inflation in the Hungarian economy is evolving much more favorably than previously thought. The bank cut its 2026 inflation forecast to 3.2%, down from 3.8% in September, a revision Balatoni called “substantial and highly significant.”

At the same time, he offered a note of caution. Short-term risks remain, including the wave of repricing typically seen early in the year and the uncertain effects of phasing out retail price caps (temporary rules introduced by the government to limit price markups on certain products). Still, the MNB believes most retailers have already adapted to these caps, meaning their removal may cause a smaller inflation bump than once feared.

More balanced growth
The central bank expects Hungary’s economy to expand by 2.4% in 2025, driven mainly by household consumption. Rising real wages and government transfers could lift spending, with households likely to use 50–60% of those transfers immediately. Exports and investment are expected to contribute more meaningfully only from the second half of 2025 or even 2027, as global demand firms. Encouragingly, growth forecasts for both the U.S. and the eurozone - Hungary’s key export markets - have improved.

The MNB projects a budget deficit of 4.7–5.2% of GDP next year, broadly consistent with government expectations but well above the EU’s 3%/GDP limit.

Food and energy: from drivers to drags
Perhaps the most striking shift is in the global food market. A price surge that lasted 18 months—pushing global food costs up roughly 18%—came to an abrupt end in September. Since then, prices for sugar, dairy, grains, and even pork have fallen sharply.

Energy markets tell a similar story. Brent crude and European natural gas benchmarks (TTF) have both fallen, with gas prices down 10–14%, further easing pressure on producers and consumers.

Slower inflation but not a straight line
While the bank nudged its 2027 inflation forecast slightly upward, it emphasized that two-thirds of the change is due to base effects rather than underlying pressures, something monetary policy should not overreact to.

Large-scale investments may add around 0.6 percentage points to GDP in 2026, while the primary budget deficit is expected to remain around 1% of GDP next year.

Taken together, the latest report marks a turning point: Hungary is moving out of an era of painful price surges and into a period where inflation may finally return to manageable levels. The road ahead still contains risks, but for the first time in years, the central bank’s tone carries a cautious optimism.